As detailed below, two potential return-on-investment results are: (1) -2.1% absolute return (equivalent to - 7.2% annualized return-on-investment for the 108 days holding period) if Cigna's price is unchanged at today's $252.55 price on the June 16th, 2023 expiration date; and (2) -1.2% absolute return (equivalent to -4.2% annualized return-on-investment for the 108 days holding period) if it is in-the-money (i.e. above the $255.00 strike price) on the June 16th options expiration date.
The Cigna Corporation (CI) -- Covered Call Position Continued by Rollout
The original buy/write transaction was as follows:
3/1/2023 Bought 100 Cigna Corp. shares @ $289.40
3/1/2023 Sold 1 Cigna 3/17/2023 $280.00 Call option @ $11.70
3/7/2023 Quarterly ex-dividend of $1.23 per share
3/17/2023 One Cigna Call option expired out-of-the-money and 100 shares remain in the Covered Calls Advisor Portfolio
3/21/2023
Continued Cigna Covered Call position by selling one March 31st,
2023 $27.50 Call option @ $4.10 per share. The stock price was $276.68
when this transaction was made.
3/31/2023 One Cigna Call option expired out-of-the-money and 100 shares remain in the Covered Calls Advisor Portfolio
4/3/2023
Continued Cigna Covered Call position by selling one April 21st,
2023 $270.00 Call option @ $2.50 per share. The stock price was $262.30
when this transaction was made and the Delta for this Call option was 29.9.
4/24/2023
Continued Cigna Covered Call position by selling one May 12th,
2023 $265.00 Call option @ $3.52 per share. The stock price was $256.47
when this transaction was made and the Delta for this Call option was 43.2.
5/12/2023 Continued Cigna Covered Call position by executing a net credit Call spread at $3.00 per share by buying-to-close one May 12th, 2023 $265.00 Call and simultaneously selling-to-open one May 26th, 2023 $260.00 Call option. The Implied Volatility of the new Call was 21.8 and the Delta was 38.8 when this transaction was made.
5/26/2023 One Cigna Call option expired out-of-the-money and 100 shares remain in the Covered Calls Advisor Portfolio
6/1/2023 Continued Cigna Covered Call position by selling one June 16th, 2023 $255.00 Call option @ $3.70 per share.
Two possible overall performance results (including commissions) for this Cigna Covered Call position are as follows:
Covered Call Cost Basis: $27,770.67
= ($289.40 - $11.70) * 100 shares + $.67 commissions
Net Profit Components:
(a) Options Income: +$2,847.98
= ($11.70 + $4.10 + $2.50 + $3.52 -$.06 +$3.06 +$3.70) * 100 shares - $4.02 commissions
(b) Dividend Income: +$246.00
= ($1.23 dividend per share x 100 shares) x 2 quarterly dividends
(c) Capital Appreciation (If CI stock price unchanged at $252.55 on the June 16th options expiration date): -$3,685.00
+($252.55 - $289.40) * 100 shares; or
(c) Capital Appreciation (If Cigna shares assigned at $255.00 strike price at the 6/16/2023 options expiration): -$3,440.00
+($255.00 - $289.40) * 100 shares
